The statistics are in...and they are staggering: a whopping 90% of vacation rental homes are not properly insured.
It's a good thing I met vacation rental insurance expert Tina White Spencer at the Vacation Rental Managers (VRMA) conference in Portland, Oregon. The VRMA conference always brings together the best of the best, and I was lucky enough to be seated right next to her. It must have been karma that brought us together!
Not only did we have fun shooting the breeze in the exhibition hall, we also had some really productive conversations about vacation rental insurance.
Tina is the owner of a small boutique insurance firm, CPW Insurance, and they specialize in vacation rental coverage. Tina has been spreading the good word about proper coverage for over 10 years...long before vacation rentals even went trendy! She's an expert if I've ever seen one, and she knows more than most just how many vacation rentals are insufficiently covered.
Here's my own scary story:
Last year, I contacted my insurance provider in Kauai with a couple questions, and in that conversation learned that my policy only covered long-term rentals! Needless to say, I totally panicked. For way, way too long my rental had not been fully protected. And I had absolutely no idea.
Looking back now I thought the $300 annual policy (my homeowners policy covered a portion) seemed too good to be true...and Tina confirmed it. A proper vacation rental insurance policy, she told me, will cost 2-3 times what you pay for your home as a secondary residence.
Moral of that story? If it seems too good to be true, it probably is!
On the plus side, Tina was also quick to remind me that since I'm running a business, the insurance cost is an expense that I can write off at the end of the year. Yay for write-offs!
Luckily, I was able to get a new policy with a firm that specializes in vacation rentals before disaster struck. But Tina, unfortunately, knows plenty of people that did have to learn the hard way. Don't let it happen to you!
If you are running a vacation rental business out of your home or second home, you are considered a commercial entity and must be insured as one. Likely, there are also special requirements that you must implement like fire extinguishers, smoke detectors, carbon monitors and deadbolts. Otherwise, you could be on the hook for damages.
Tina: Yes, a standard homeowners policy excludes coverage for a business. When you are taking money to rent your home, insurance companies define that as business use of your dwelling.
Personal liability is what protects you personally for bodily injury and property damange liability. Personal liability excludes business activities.
Commercial insurance is for protection for bodily injury and property damage liability as a business. It protects the entity named on the declarations page and any additional insureds named on the policy. If you have the property in the name of an LLC, it should be the first named insured on your declarations page of your business policy.
It is very important that the entity is named otherwise there is no coverage.
Tina: If you are just renting rooms in your home, you can insure it as a bed and breakfast, also a commercial policy, but you must live there and actually provide breakfast to insure your home.
If you have a separate building you are renting, such as a room above a garage that is not part of the house or a pool house, you would insure the garage building or pool house on a commercial vacation rental insurance policy.
Tina: No, you would need 2 different umbrella policies. Your personal umbrella to cover you for personal and a commercial umbrella that would extend beyond the commercial policies in the name of your business entity.
Tina: Vacation rentals should have all of the same "life safety" requirements as a home. If you have more than one story, the county you are in may have heavier life safety requirements more similar to hotel standards.
Its always best practice to reach out to your insurance provider to double check as well as the local agencies.
Tina: The basic coverages are fire, smoke, water, wind, theft but note some states may exclude wind and some vacation rental policies may exclude theft, so watch out for this.
Flood, earthquake, hurricane, mainly disaster coverage is excluded in addition to pests like termites and mice.
P.S. - A big, warm thank you to Tina for helping me get the good word out about insurance for vacation rentals!
P.P.S - You can reach Tina with more specific questions at firstname.lastname@example.org. FYI, she is licensed in Washing, Oregon, Idaho, California and Colorado.